Chinese anti-monopoly investigation of the automotive indust

2019-09-06

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The National Development and Reform Commission's anti-monopoly
investigation continues to make waves in the automobile industry. The
NDRC has already fined 12 Japanese manufacturers a total of 1.24 billion
RMB ; 831.96 million RMB in fines were directed at eight automotive part
manufacturers and the remaining 403.44 million RMB was targeted at four
Japanese axle bearing manufacturers, including NHK.

The anti-monopoly crackdown of the Chinese automobile market is destined
to be one of the major industry events of 2014. The investigation is
targeted at ending monopolistic practices and reducing excessive
automobile prices in the industry. However, many automobile dealerships
and many own brand manufacturers doubt that the investigation will
actually achieve this goal.

Earlier this month, the Jiangsu Price Bureau announced that it had
already obtained relevent evidence in its investigation of Mercedes-Benz
showing that the manufacturer has engaged in price monopoly practices
for its automotive parts and after sales services. Prior to this, Audi
had already admitted to engaging in monopolistic behavior and announced
that it is willing to accept any legal penalties.

A dealership representative attending the recent Chengdu International
Motor Show shared his perspective: "Looking at the present state of
affairs, manufacturers are only reducing the prices of poorly selling or
already overpriced automobiles. As a matter of fact, market conditions
already dictate that manufacturers which don't actively reduce their
prices will see their sales fall. Also, the only automotive parts that
are having their prices reduced are generally those that don't need to
be replaced anyway."

The Hubei Province Price Bureau has also conducted an investigation of
four BMW 4S dealerships in Wuhan. During the investigation, the Bureau
came to the conclusion that the dealerships had engaged in monopolistic
price fixing; they have been fined 1.63 million RMB in cash. The
penalties have surely gained the attention of several other 4S
dealerships in the country.

Furthermore, many manufacturers have been accused of passing on the
costs they are suffering to dealerships. Representatives from several
dealerships, including those selling Mercedes-Benz and Volvo
automobiles, have admitted that manufacturers have only slightly lowered
the prices at which they supply parts from dealerships, leaving them to
suffer the brunt of the costs.

A representative from a luxury automobile 4S dealership in Sichuan
explained the plight of dealerships, stating that dealerships are merely
following the provisions stated in the Automobile Brand Sales Management
Measures. The representative advocated that automobile manufacturers
should be the main target of the investigations. The representative
explained in detail: "Currently, dealerships are having a very hard time
conducting business. New car sales generally don't bring in any profits,
[so dealerships] have to rely on after sales services."

Aside from dealerships, many analysts worry that the anti-monopoly
investigations may inadvertently harm the sales of own brand
manufacturers. As prices of foreign automobiles and automotive parts
decrease, they will compete alongside more economically-priced own brand
models. When asked whether or not he agrees with that statement, Changan
Automobile President Zhang Baolin answered that they absolutely will.
However he added that own brands will be forced to produce more
competitive products.

An industry analyst added that the existing legislation favors
manufacturers over dealerships. Manufacturers rarely look out for the
livelihood of dealerships after selling vehicles to them. The analyst
added that the legislation may lead to decreasing prices for
automobiles, automotive parts and after sales services, at the same time
boosting sales.

Since July, several major players in the automotive industry have been
found guilty by the investigations of engaging in monopolistic
activities. Among them, Audi and Cadillac, as well as 12 Japanese auto
part suppliers, are facing stiff penalties. Many manufacturers have
responded by lowering the prices of their automobile and auto part
products./

China Association of Automobile Manufacturers Deputy Managing Director
and Deputy Secretary General Dong Yang explained his prospects for the
automobile market following the policies: "Having manufacturers reduce
prices is of course good news, as the prices for imported and luxury
automobiles are very high. At my time at BAIC, dealerships would be
willing to sell imported Mercedes-Benz vehicles, but were not fond of
selling Beijing Benz vehicles. Why you ask? Because imported vehicles
were very profitable."

However, Mr. Dong made sure to emphasize that the luxury automobile
segment is separate from the rest of the market. As such, the result of
the policies on the overall automobile market will be somewhat limited./